Sir David Tweedie, Chairman of the IASB, and Sir Bryan Nicholson, Trustee of the IASC Foundation, provided an update to European Finance Ministers (ECOFIN) on reforms to IAS 39 Financial Instruments.
Opening remarks by Sir Bryan Nicholson
Trustee of the IASC Foundation
Sir David and I welcome the opportunity to appear before you today. Sir David is accompanied by Gavin Francis, director of capital markets, the lead IASB staff director on the IAS 39 reform project. Gerrit Zalm, our chairman and your former colleague, apologises for not being able to attend. As one of the eight European-based trustees, I have been asked to accompany Sir David today.Since the beginning of the global economic crisis, the trustees have been actively engaged with the issues raised. We have committed ourselves to taking urgently all the actions necessary within our sphere of responsibility to respond to these issues.
As the crisis unfolded, the negotiations leading to the establishment of a public accountability link to the Monitoring Board were concluded. The Monitoring Board came into being early this year and has played its part in encouraging and supporting swift action by the IASCF. Whilst the European Commission has been present and has participated in our meetings with the Monitoring Board, we would greatly value its full participation in a body it helped to create and hope that may soon be possible.
Conscious of the urgency placed on the reform of IAS 39, the Trustees have strongly supported the need to complete the first part of the reform by year end. We have received regular updates in public meetings to ensure timely completion and fair consideration of stakeholder input. Before handing over to Sir David, I would make four points from the Trustee standpoint about the work to reform IAS 39.
01. The trustees are pleased with the unprecedented scale of the stakeholder engagement that the IASB has undertaken to complete its work, including with prudential supervisors and those tasked with co-ordinating the global regulatory response to the crisis.
02. The IASB has made real substantive adjustments to its original proposals to address issues raised by stakeholders. The Trustees believe these have improved the proposals and aided transparency.
03. The Trustees have been impressed with the pragmatic and listening approach that the IASB has taken.
04. The Trustees believe that the IASB’s developing proposals on a reformed IAS 39 represent a major step forward on a matter that has been contentious for years.
Prepared statement by Sir David Tweedie
Chairman of the IASB
I greatly appreciate the opportunity to speak to you regarding the status of the IASB’s revision of IAS 39. When I appeared before you in June, the Council emphasised the need to have a revised standard available for use this year. I gave a commitment to deliver on this timetable. We will publish the new standard in November.
The new standard on classification and measurement responds directly to the call of the G20 Leaders to ‘reduce the complexity of accounting standards for financial instruments’. As urged by the G20 Finance Ministers in September, we have taken ‘account of the Basel Committee guiding principles on IAS 39 and the report of the Financial Crisis Advisory Group’. Additionally, we have responded to issues raised by this Council regarding impairment and the fair value option and to subsequent concerns raised in the European Commission comment letter of 15 September on our proposals. We are working closely with the European Commission and the European Financial Reporting Advisory Group (EFRAG) to facilitate a smooth endorsement. We have also briefed and received the advice of the Economic and Monetary Affairs (ECON) Committee of the European Parliament.
